January 2010 Archives

It was the perfect house for us: built in 1917 with Arts and Crafts character and a showcase dining room and living room; a modest two bedrooms, which always made me happy that there wasn't more to vacuum; a backyard lovingly created by the former owner who was a landscape architect; and a pleasant kitchen, with tile in my favorite green.

"We'll never move!" we said, and congratulated ourselves on having found a place that we could stay in right through retirement, thanks to the lack of stairs.

The great part about thinking you'll stay in a place forever is that you stop obsessing about your home's investment value, or whether certain improvements will help or hurt its saleability. A home is, after all, a place to live in, and what's the point of home ownership if you can't turn the place into one that suits your personal needs?

But then there's the downside of thinking you'll be in a place forever: You, that is to say "I," get a little complacent. New paint on the inside? I still hadn't found the perfect colors. A new roof? It's not leaking yet, we figured we'd give it one more year.

And then came the "never say never" moment. We'd been planning to remodel the garage to gain a little space for visiting relatives. At dinner one night, my husband mused, "Should we consider finding a bigger place, instead?" The very next day, we visited an open house, fell in love with the place, and put in a bid. By that Thursday, we were in contract to buy it.

And now, fast forwarding a bit, we've just sold the house we thought we'd never leave. The process was crazy -- on short notice, having to organize years' worth of stuff, plus hire an army of carpenters, painters, cleaners, window washers, a stager, and more -- and still I was out in the yard every day, pulling weeds, putting in new plants, and getting my hands so muddy and calloused that I fear they'll never accept lotion again. Lucky for us, the buyers agreed to deal with replacing the roof.

So much for certainty! But I'm not sorry -- the house we sold deserved our efforts, and we love our new place, too -- so much that I'm determined that we'll never move!

I've been reading for months about how lenders have become nitpicky in the extreme when it's time to approve a mortgage loan. Gone are the days when a home buyer could prequalify and be assured that the rest would be smooth sailing.

But there's a difference between reading about something and living it. And having just bought a home -- the second one I've owned (gotta sell that first one now) -- I can say I've lived the mortgage applicant's experience in painful sensurround.

Maybe I was naive, but I thought having a great credit score (the legacy of having been insanely frugal even before it was chic) and making a big down payment would protect me from some of the most suspicious lender queries. Wrong.

First off, they wanted to know where every cent of money was coming from, apparently to make sure we weren't disguising any other loans from friends or family. An investment account? Ok, then how did that large-ish deposit get there? A transfer from my personal checking account? Let's see the bank statement. Getting gifts from parents? Better provide not only a gift letter and proof that they really have the money, but proof that it was in their account for at least ninety days, lest Mom and Dad have been borrowing money from someone else! (Mom and Dad, for the record, were not amused.)

Then they called my employer so often to ask whether I was still working there that the H.R. Director practically begged for mercy.

But here's the one that still has me in a state of mystification. Our lender -- and this is a big established bank, by the way -- wanted a signed letter from us explaining why we were moving a mere 1.24 miles from our previous residence. Huh? The obvious fact that the new house has one more bedroom, one more bathroom, and is in a nicer neighborhood didn't occur to them? Is there something inherently suspicious about moving within the same city? (I'm just happy I don't have to switch dentists.) And if there were some nefarious reason for such a switch (which my imagination has still failed to come up with), would I be dumb enough to say it in a letter in which I could -- and did -- explain that we wanted the extra space?

But, all's well that ends well (I hope). The loan was approved, and I can move onto dealing with the other craziness of moving and selling . . . more on that to come.

When asked how I'd describe the real estate market as we
begin 2010, the word that comes to mind is "caution." Both buyers and sellers
are waiting to see what will happen next, and trying to avoid making impulsive
or risky decisions.

If the current state of the economy and home prices weren't
enough to make people cautious, anyone with friends or a newspaper can find
instances of how overly eager buyers and sellers got themselves into trouble
just a few years back.

For example, when Alan and Jill found their dream house in
2006, and figured they could stretch their finances just far enough to make
the payments, they decided to accept the inspection reports that had already been provided by the
sellers and their agents. After all, they reasoned, why spend another several
hundred dollars to reinvent the wheel?

Almost three years
after closing, the home is worth 25% less than what Alan and Jill bought it for
and they are saddled with a money pit in terms of needed repairs. Everybody is
suing everybody else. Alan and Jill allege the structural pest control
inspections were really cover-ups, and both they and the sellers claim their
agents failed to protect them.

This kind of thing creates a lesson for present-day buyers who
- usually with help from protective agents - now more commonly insist on
"another set of eyes," by having their own inspections done. For a few hundred
dollars, they're buying peace of mind, and possibly opening the door to
negotiating an adjustment to the purchase price. With the market still slow,
sellers have little choice but to go along with the buyers' wishes in this
regard.

The January 2010 issue of Smart Money magazine has a fascinating article on the impact that Internet sites such as Zillow have on negotiations over home prices.

When websites such as Zillow first rolled out their databases of comparable home prices -- where you can simply type in an address and get a "Zestimate" of the house's worth -- most industry experts thought it was cute, but essentially irrelevant.

No database that pulls together public sales records can, after all, incorporate knowledge of street desirability, views, charm, and other such factors that play into a buyer's willingness to pay more or less for a, say, "2 bedroom 1 bath." And pricing houses isn't an exact science, but depends on buyer psychology -- what the market will bear.

But what if buyer psychology is being molded by websites showing comparable values, so that the online data becomes a self-fulfilling prophecy? That's in essence what the Smart Money article is suggesting, with stories of deals going awry because the buyer insists that the house is worth no more than its Zestimate -- or being suspicious when the Zestimate is far higher than the list price.

What's a home seller to do? Start by looking at how your house fares on the online databases, then at what you can do to change it. Zillow does allow sellers to enter certain data about their home, such as renovations and home features, and add some descriptions to entice buyers. (You need to register, then enter your home address to get to its "detail page," then look for the tabs allowing you to edit the data.) I just did it for my house -- with no immediate changes to my Zestimate, but they warn that it may take some time. I'll check back in when I find out!